Bullish fund managers shun UK equities
UK stocks are out in the cold as global fund managers are encouraged to look elsewhere by an easing of recessionary trade war fears.
16th September 2025 13:17
by Graeme Evans from interactive investor
A bullish global survey of professional investors today revealed the biggest monthly rotation out of UK equities in two decades.
The Bank of America research, which involved 165 participants with $426 billion (£312 billion) of assets under management, found that allocation to UK stocks is now the lowest since March 2024.
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The weaker sentiment comes amid uncertainty over tax hikes in the November Budget, as well as doubts about whether Bank of England interest rates will fall again this year.
A weaker dollar due to forecasts of four cuts by the Federal Reserve in the next 12 months has weighed on multinationals, although the FTSE 100 is still 13.3% higher year-to-date.
The recent shunning of UK stocks - from last month’s net 2% Underweight position to 20% Underweight in September - is in contrast to sentiment earlier this year, when US stock allocations saw their largest ever two-month drop.
This month’s survey reveals that global fund managers are their most bullish since February as fears of a recessionary trade war continue to fade.
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A net 16% of respondents expect the global economy to weaken, much better than August’s reading of minus 41% and the biggest improvement since October.
The BofA research, which was carried out between 5 September and last Thursday, found that cash balances remain low at 3.9% of assets under management.
Equity allocation is at a seven-month high, a position highlighted by last night’s record closing positions for the S&P 500 index and Nasdaq Composite. The landmarks have come despite a record 58% of investors saying that global equity markets are overvalued.
Long positions on the Magnificent Seven remain the survey’s most crowded trade, having reclaimed top position in last month’s report. Long gold is in second place based on the response of 25% of investors, up sharply from 12% in August.
On the theme of artificial intelligence (AI), 48% of investors said that they think AI stocks are not in a bubble. Half of respondents believe AI is already increasing productivity, but with another 28% expecting the improvement to come after 2026.
The survey said investors increased allocation to stocks in healthcare, telecoms and consumer discretionary and reduced allocation to UK stocks, utilities, energy, and EU and emerging market stocks.
On risks, 26% of investors view a second wave of inflation as the biggest tail risk. This is followed by 24% pointing to the loss of Federal Reserve independence and US dollar debasement.
Tariff worries are fading, with just 12% of investors saying that “trade war triggering global recession” is the biggest tail risk, down from the number one spot at 29% in August.
Asked about the most likely outcome for the global economy, two-thirds expect a “soft landing” and 18% see no landing.
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